Government Poli...

By Angela Keya

Government policies in the Kenyan sugar industry focus on enhancing competitiveness, increasing production, and protecting local farmers through strict import regulations and sector reforms. Key measures include a 4% Sugar Development Levy (effective July 2025) and the privatization of state-owned mills.

Key Government Policies and Initiatives

1. Sugar Development Levy (SDL)

A 4% Sugar Development Levy (SDL) is applicable on all domestic and imported sugar in Kenya, effective July 1, 2025, to fund the rehabilitation and development of the sugar sector. This levy was established under the Sugar Act No. 11 of 2024 and the Sugar Development Order, 2025, and is collected by the Kenya Revenue Authority (KRA). The levy applies to both ex-factory prices for local sugar and the Cost, Insurance, and Freight (CIF) value of imported sugar. The funds aim to support factory modernization, research, and farmer organizations to revitalize the industry.

The Kenya Revenue Authority advises that payments can be made via iTax (under Agency Revenue) or through the eCitizen platform.

2. Import Restrictions and COMESA Safeguards

Kenya officially ended 24 years of COMESA sugar safeguards on November 30, 2025, allowing for unrestricted, duty-free sugar imports from member states. This move follows the completion of restructuring reforms, shifting the local industry from a protected regime to a competitive, market-driven, and private-sector-led production environment.

A) Aspects of the COMESA Safeguard Exit

After eight extensions, Kenya stopped capping sugar imports from COMESA, meaning no special, temporary import restrictions now apply to the sector.

The market is now open to cheaper sugar from other COMESA countries, forcing local producers to improve efficiency to compete.

The key aspects of the safeguard exit are:

• Duration & Purpose: The safeguards, which have been in place since 2001, were extended eight times before the exit to allow the Kenyan sugar industry time to stabilize, restructure, and improve competitiveness.

• Market Impact: Without the safeguard, Kenya now faces direct competition from regional producers with lower production costs, such as Eswatini and Egypt.

• Continued Strategy: Despite the exit, Kenya plans to manage potential supply gaps through controlled, World Trade Organization-compliant imports from both COMESA and non-COMESA sources.

• Current Industry Status: Sugar production has relatively increased (as of late 2025), driven by improved farming practices, fertilizer subsidies, and factory rehabilitation.

B) Import Regulations and Context

While the specific sugar safeguard lapsed, general import regulations for goods, including standards, quality, and taxes, still apply, according to the Kenya Revenue Authority.

The import of items such as counterfeit currency and pornographic materials remains prohibited.

3. Privatization and Reform

In 2025, the Kenyan government finalized 30-year lease agreements for four major state-owned sugar mills—Sony, Nzoia, Chemelil, and Muhoroni—to private operators to revive the struggling sector. Private investors, including West Kenya Sugar Company and Kibos Sugar & Allied Industries, took over operations in May 2025 to modernize facilities, significantly boost annual production, and improve farmer payments.

Precisely, leasing was done as follows:

1. Muhoroni Sugar Company leased to West Valley Sugar Company of Kipchimchim Group of Companies.

2. Chemelil Sugar Company leased to Kibos Sugar and Allied Industries Limited.

3. Nzoia Sugar Company leased to West Kenya Sugar Company, led by Jaswant Rai.

4. Sony Sugar Company leased to Busia Sugar Industry Ltd, led by founder and Managing Director Ali Ahmed Taib.

The 30-year concessions aim to modernize outdated machinery, increase efficiency, and clear debts.

Investors are to pay an annual rent (approximately KShs. 40,000–45,000 per hectare) and concession fees (KShs. 4,000 per tonne of sugar and KShs. 3,000 per tonne of molasses).

While unions threatened action over job losses, the government pledged to retain about 80% of workers and settle over KShs. 5 billion in salary arrears.

As of late 2025, some mills were already operational, with others undergoing final rehabilitation.

The initiative aims to reverse years of underperformance, where public mills were consistently outperformed by private ones. Despite opposition from some legislators and unions, the Government and the Council of Governors pushed forward, arguing that private management is essential to end the cycle of bailouts.

4. Regulatory Framework (Sugar Act 2024)

The commencement date of the Act was 21st November 2024. It establishes the Kenya Sugar Board (KSB) and the Kenya Sugar Research and Training Institute (KESRETI). The Act reinforces the role of the Kenya Sugar Board in licensing, registering growers, and ensuring fair trade practices.

KESRETI is mandated to carry out the research function in the sugar sector.

5. Pricing and Promotion

Sugar prices in Kenya have recently experienced high volatility, with retail prices averaging over KSh 170 per kg as of mid-2025, driven by supply shortages in the Western belt. The Government intervened by raising sugarcane prices to KSh 5,750 per tonne.

a) Key Pricing Drivers and Trends (2025)

• Retail price surge: Retail prices rose to roughly KSh 170 per kg in June 2025, with earlier shortages in 2023 pushing prices as high as KSh 200 per kg.

• Farm-gate prices: To encourage production, the Government increased the minimum sugarcane price to KSh 5,750 per tonne in July 2025.

b) Promotion and Market Dynamics

• Local vs. Imported: Despite taxes, imported sugar often remains cheaper than local, with retailers shifting focus to imports to boost margins.

• Private Sector Competition: Private millers have been dominating market share through better cane payment terms and higher extraction rates (approximately 10%) compared to public mills. This was before the leasing of public mills in May 2025.

• Promotional Tactics: Retailers often use bundled pricing, discounts, and “best price” promotions on imported, packaged sugar brands to gain market share during periods of low supply.

• Future Outlook: High demand, coupled with industry reforms and potential shortages, is expected to keep sugar prices elevated.

6. Environmental Policies

Environmental policies play an important role in shaping the Kenyan sugar industry. This is because the entire process of sugarcane farming and sugar processing affects land, water, air, and biodiversity. Several national policies and regulations guide environmental management in this sector. The key environmental policies are:

• Environmental Management and Coordination Act (EMCA), 1999

  This is the main environmental law in Kenya, administered by the National Environment Management Authority (NEMA). It requires sugar factories and large sugarcane farming projects to:

  • Conduct Environmental Impact Assessments (EIA) before establishing factories or expanding operations.

  • Implement Environmental Audits to monitor pollution and environmental performance.

  • Comply with regulations on waste management and emissions.

• Waste Management Regulations, 2006

  Waste management in the sugar industry focuses on reducing, reusing, and recycling by-products like bagasse, molasses, and filter mud to minimize environmental pollution, such as foul odours and water contamination. These regulations require:

  • Proper treatment and disposal of industrial waste.

  • Recycling and reuse of by-products where possible.

• Climate Change Act, 2016

  This policy encourages industries, including sugar manufacturing, to:

  • Adopt climate-smart agriculture in sugarcane farming. This can be achieved by adopting drought-tolerant, fast-maturing cane varieties to combat reduced rainfall.

  • Promote energy efficiency and renewable energy, such as bagasse-based power generation, to reduce reliance on fossil fuels and lower their carbon footprint.

• Air Quality Regulations, 2014

  Sugar mills that burn bagasse for energy must control emissions to prevent air pollution. The regulations set limits on:

  • Smoke and particulate emissions

  • Industrial air pollutants

• Agricultural Sector Transformation and Growth Strategy (ASTGS)

  The Strategy aims at increasing small-scale farmer incomes, boosting agricultural output and value addition, and improving household food resilience. Although mainly agricultural, it promotes sustainable cane farming practices such as:

  • Soil conservation

  • Reduced chemical use

  • Sustainable land management

All these mentioned policies aim to shift the industry from reliance on imports toward a self-sufficient, competitive sector while ensuring better returns for farmers.